Writer-director Adam McKay reveals what it took to bring Will Ferrell back to classy San Diego.

That Paramount finally decided March 29 to make an Anchorman sequel was as much a surprise to Will Ferrell and Adam McKay as anyone. After all, the collaborators had been trying for years to revive Ron Burgundy, and only three months earlier, the possibility had been "really 100 percent dead," according to McKay. The studio had refused to budge from a $35 million budget limit. But that number wouldn't have covered even a few of the above-the-line salaries: Ferrell's ask can reach $20 million, and several of the secondary Anchorman players, including Paul Rudd and Steve Carell (now up to $12 million-plus), have since blown up.

"Originally, I was saying, 'Hey, $80 million budget because it'll be period, and you gotta pay the stars,' and they were, like, 'Are you crazy?' " says McKay. "And then quickly I was like: 'All right, fine, $60 million, and we can make it work. We'll all take pay cuts,' and they were still like, 'Are you out of your mind?' "

Anchorman, made for only $26 million, racked up a decent $85 million in domestic revenue for DreamWorks in summer 2004. But while the film's quotable lines and 1970s San Diego TV news setting helped generate a cult following on DVD, the period humor didn't play overseas. Still, Paramount Film Group president Adam Goodman had been the executive on the film at DreamWorks and remained interested in a sequel when rights landed at Paramount with him. "At first we were like: 'No, we don't want to do sequels. We have too many ideas,' " says McKay. "Then, finally, we kept hearing the question so much from fans. Can-we-do-a-sequel suddenly became an interesting challenge to us." But studio revenue projections didn't justify paying the Anchorman team to return. "Their numbers machine purely looked at the box office. It didn't project off of DVD sales and TV and cultural influence," says McKay.

McKay and Ferrell were set to move on to a Step Brothers sequel at Sony when a last-ditch check-in call from McKay's WME agent Ari Emanuel suddenly turned up a yes from Goodman. Another film had fallen through at the studio, and McKay had been helping to get Paramount's Sacha Baron Cohen comedy The Dictator ready for a May release. With the deals finally made, McKay had a $50 million budget with enough backend participation to make the yearlong commitment worthwhile, agreements from the core cast members to return (though not all of their deals have closed) and a tentative February start date. Ferrell and McKay have holed up for two months in Ferrell's guesthouse to hammer out a first draft, with the studio mulling a potential summer 2014 release.

"We have a basic idea," says McKay, who admits that a sequel might even include the return of Christina Applegate's Veronica Corningstone character. "We're staying roughly period, and I would just say it's the next stage in the development of American media and news. The fun of these characters is they confront change very poorly."